A key motive for Cuba in this week's United States-Cuba accord is Venezuela's diminishing oil gifts to its biggest ally.
Venezuela sent about 100,000 barrels a day to Cuba last year in exchange for medical personnel as part of a regional subsidy program to promote the government's socialist message. While there are no official data for shipments to Cuba this year, anecdotal evidence suggests volumes have already slumped to about 70,000 barrels a day, Moody's wrote Tuesday.
The regional aid is to be scaled back further as oil's biggest rout in a decade undermines a socialist revolution that transformed Venezuela over the past 15 years under Hugo Chavez and Nicolas Maduro, according to Eurasia Group and EnergyNomics. The commitment by Cuba and the U.S. to normalize relations opens the door for the island nation to buy more oil on the open market and for Venezuela to sell more for cash.
"Venezuela needs all the money it can get right now and will likely shift a lot of the oil that its exports to Cuba and Petrocaribe to the U.S.," Carlos Rossi, president of the Caracas-based EnergyNomics and formerly an economist with the Venezuelan Hydrocarbons Association, said by telephone.
Cuba pays for Venezuelan oil with care provided by about 30,000 medical and sports personnel sent to the country. Venezuelan exports to Cuba and Petrocaribe members, from Guyana to Nicaragua, are down 20 percent to 25 percent this year, Eurasia Group analyst Risa Grais-Targow said, citing tanker data. Cuba's domestic market consumes an estimated 40,000 barrels a day and the rest of the oil it receives is sold on the open market, according to Eurasia Group estimates.
Cuba's compromise also comes as its longtime patrons, Venezuela and Russia, are squeezed by a plunge of almost 50 percent in oil prices this year to the lowest levels since 2009.
"Countries want to be less reliant on Venezuela at a time Venezuela has less resources to provide for them," Avinash Persaud, the Barbados-born chairman of Intelligence Capital and Elara Capital in London, said. "In the case of Cuba, they don't want this to be another Soviet Union, where their dependency suddenly disappears."